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Position of the Contemporary Roman Catholic Church on Allowing the Charging of Interest

Professor Kaczor states that, in his opinion, the Catholic Church maintains that usury is wrong; but does not hold and never did hold that all charging whatsoever of amounts beyond the principal is wrong. Germain Grisez points out:

The Church never taught that all charging of interest is wrong, but only that it is wrong to charge interest on a loan in virtue of the very making of the loan, rather than in virtue of some factor related to the loan which provides a basis for fair compensation.[1] John Noonan notes:

By 1750, then, the scholastic theory and the counter theory, approaching the same problem form different theoretical viewpoints, agree in approving the common practice “of demanding interest on loans.”[2]

As time went on, the majority of theologians approved of taking interest on loans. The Holy Office did not condemn these opinions, and confessors were not obliged to disturb those involved in the practice. In 1917, Canon law actually required Catholic institutions, such as hospitals, schools, or universities, to invest their assets profitably.

According to St. Thomas Aquinas:

1. The lender may require, over and above the amount of the loan, indemnity protection or insurance against loss or damage.

2. The lender may be repaid not just for the principal but also for expenses incurred in making the transaction, including what was “lost” in the transaction. For instance, if the borrower pays back the principal late, the lender may ask for an additional return, since he was deprived of the use of the money during a time when he could have made use of it. As Firmis[3] notes, what is “lost” could therefore include money that could have been generated had the loan not been made. Aquinas apparently considered this possibility and rejected it: “But the lender cannot enter an agreement for compensation, through the fact that he makes no profit out of his money: because he must not sell that which he has not yet and may be prevented in many ways from having.[4]

Professor Kaczor argues that the truth of this last phrase would seem to depend greatly upon existing market conditions. In some markets, such as the ones existing in Aquinas's day, the growth of an investment would be highly speculative; in other markets, like the ones existing today, the growth of an investment would be virtually assured (or so it was thought, until the meltdown of 2008). With the rise of such secure ways of investing money, the person who loans money loses what with reasonable assurance he could have made. In other words, Aquinas assumes that money is a sterile, non- fungible commodity; but in contemporary markets, money may be quite productive indeed. John Finnis concludes:

Aquinas's account of usury, taken with his general theory of compensation, thus identifies principles (not rules made up by moralists or ecclesiastics) which enable us to see why in his era it was unjust for lenders to make a charge (however described) in the nature of profit, but with the development of capital market for both equities and bonds it was to become fair and reasonable to make precisely such a charge, correlated with (which is not to say identical to) the general rate of return on equities.[5]

In conclusion, Professor Kaczor states that Aquinas's conclusions about lending at interest were adequate given the financial assumptions and market conditions of his time, but must be adjusted to account for contemporary circumstances.

  • [1] German Grisez, The Way of the Lord Jesus, Vol. II: Living a Christian Life (Quincy, IL: Franciscan Press, 1993), 834.
  • [2] John Noonan, The Scholastic Analysis of Usury (Cambridge: Harvard University Press, 1957), p. 377.
  • [3] John Finnis, Aquinas (Oxford, England: Oxford University Press, 1998), 210.
  • [4] St. Thomas Aquinas, Summa Theologica II — II, 78, article 2, ad 1, emphasis added.
  • [5] See note 26.
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